I’m making available the article based on our work with the Dutch government a couple of years ago. Download PDF
|Mobile phone charging receipt, Kenya Photo credit: Niti Bhan|
The unfair demonisation of the middleman is apparent in this recent article on solar power products for the low income market in Africa. “Putting African ‘power pimps’ out of business” is the headline and the rest of the text goes downhill from there:
It’s hard to imagine the concept of a “power pimp” in Africa unless you have lived there. But it makes sense and cents on a continent that lacks a unified power system. There is basically no electric power in most rural places unless you are enterprising enough to own a battery and generator of some sort –– making you the “pimp” by letting other people charge their cell phones at crazy inflated prices.
It’s a problem that humanitarians worldwide seek to address, but an Israeli solution would do this using a cell phone. The idea of Nova Lumos is to buy solar power by phone on a needs basis, putting the middleman (that pimp) out of business.
Nobody would stay in business for very long in their local communities if they were truly the “power pimps” this company has gleefully labelled them. The day 20 Kenyan shillings, about 25 cents – the standard rate for mobile charging up and down the country – is considered price gouging, rather than a standardized regional service, is one to wake up and question the gross assumptions underlying this sweeping generalization. It is no different from the top down blanket perception of the entire informal sector as “a bad thing” and the demonisation of micro entrepreneurs providing much needed services that fill the vacuum left by inadequate systems.
Its time we took a closer look at the role of the middleman, better termed as the intermediary between an unmet need in the market and the provision of a convenient and affordable service. Agency banking is one such example where enough research has been done to demonstrate the beneficial value of the middleman, not to mention the socent favourite MPesa, which would be crippled without the value addition of their nationwide agent network.
This ignorance of the realities on the ground and perception of the hyper local social networks in the rural economies of the developing world only too easily explain the consistent failures that the social enterprise industry has demonstrated to date with their attempts to enter these emerging markets.
Here is another snippet from the same article describing the product and service in terms that clearly demonstrate that absolutely no competitive analysis or market research has been conducted. A simple online search would show companies like MKopa and Econet wireless way ahead of the game, having completed pilots and launched in their respective markets.
Davidi Vortman, general manager of the company, tells ISRAEL21c that the idea is to sell small mobile solar systems to individuals –– for charging cell phones, lights or small appliances –– paid for in affordable increments using a cell phone.
“The system is small enough for one person to carry and simple enough for a person to put on the roof. Just connect it without any technician; and use a cell phone to operate it through a mobile phone with a simple SMS,” Vortman
Paying in increments by phone could eliminate this barrier. The challenging part will be securing the systems and penetrating the market before other companies jump on the bandwagon. Nova Lumos was founded in 2012 and is now carrying out pilot projects to test the system using several hundred units in Nigeria and Guinea.
What concerns me about these hyperbolic claims and sweeping generalizations is that they inevitably lead to spectacular failures on the part of this sort of enterprise yet the negative impact is primarily borne by the local populace. Not quite the kind of social impact we’re seeking …
Agriculture is the essence of life, but it seems leaders are not getting the idea as farmers continue to experience the effects of climate change and in their own innovative ways, are rapidly adapting. A walk in various farms of Western Kenya farmers, many reiterate that, they have witnessed unpredictable weather conditions with long spells of drought and irregular rains that have had a negative effect on their lives.
“By May, our maize crops would have tussled after we had top dressed but we are still planting or weeding for the first time. The planting season is over and we are not sure if we will have the yield we anticipate,” the farmers lament.
Christiana Figueres, Consultative Group on International Agricultural Research (CGIAR) Fund Council Chair and Vice President of Sustainable Development at the World Bank Inger Andersen, during the COP 16 meet in Caucun, Mexico, noted that agriculture is an area that needs to be moved into the negotiations.
“The story about agriculture is one that is on everybody’s mind,” she said; “agriculture needs to be positive for people, positive for productivity and positive for climate.”
Improving agricultural productivity is the key for reducing poverty in the country. A global consensus has emerged that agriculture must move up on the global development agenda, and that investment in agriculture, especially smallholder agriculture, must be increased if the twin goals of poverty reduction and food security are to be achieved.
In fact, if Kenya is to achieve the first Millennium Development Goal to eradicate extreme poverty and hunger, the agriculture sector needs to grow much faster and maintain annual growth rate of 6.2 percent. This requires that we work on every single aspect of the agriculture production chain from regenerating depleted soil, using better seeds and more suitable fertilizers, whether organic or industrial, to drastically improving the quality of so-called extension services that support agriculture. It implies working on marketing and storage issues, road infrastructure and financial services.
Only by tackling all those aspects at once, involving both the public and private sectors, will we manage to improve agriculture productivity in a sustainable way.
One consequence of this neglect is the appalling state of rural infrastructure in Kenya. This leaves rural areas, which have the potential to feed the more than 40 million hungry people, cut off and isolated. Kenya has only exploited a fraction of its irrigation potential, and the density of rural roads today is a fraction of what Asia had in the 1950s. As a result, farmers rely almost exclusively on rain-fed farming and face exceptionally high transport and marketing costs that makes a shift to more efficient farming unprofitable.
Kofi Annan, Chairperson of the Board of the Alliance for a Green Revolution in Africa (AGRA), has acknowledged this isolation:
“The average African small holding farmer swims alone. She has no insurance against erratic weather patterns, gets no subsidies, and has no access to credit. I say ‘she’ because the majority of small-scale farmers in Africa are women.”
Access to farm inputs is critical in increasing farm productivity.
Current use of agricultural inputs and financial services is low amongst smallholder farmers in Kenya. Small-scale farmers in rural areas of Kenya have not been able to access financial services for acquiring farm inputs among other needs to improve farm productivity. This is partly due to low density of financial institutions in rural areas; inappropriate financial products; high cost and high risks of lending. Smallholder farmers adjust by resorting to informal credit, reduction of farm inputs, sub-optimal production techniques, and borrowing from family and friends.
This limits the investment in farm equipment and capital as well as other agricultural assets and inputs. As a result, there is need for practical assistance and capacity building to be provided by the private sector. Secondly, financing rainwater harvesting projects through micro-credit organizations that appear to be a sustainable delivery vehicle to enabling communities address the challenges of access to water and sanitation. In addition, small-scale farmers concentrate on low risk, low return activities because they cannot access start-up capital and cannot transfer system risks.
As a result, there is low agricultural productivity among smallholder farmers. Low productivity attributed to inadequate use of production enhancing technologies and inputs such as fertilizers has led to food insecurity amongst the smallholder households and worsen unemployment and poverty. Credit is an important input into the production system and it contributes to increased food productivity. Access to credit increases the farmer’s working capital enabling the farmers to buy productivity enhancing inputs such as good quality seeds, fertilizers and chemicals. The challenge for agricultural financial institutions is to develop low cost ways of reaching farmers, especially smallholders.
There is need for farmer’s education to sensitize them on existing and new technologies they can use to improve production. This is especially among the rural farmers. Eventually, this would help in strengthening and establishing producers and traders unions: providing farmers with professional advice, current market information and input results in an organized way; controlling market price and products; providing farmers with loans at lower interest rate; and improving transportation, storage and processing standards.
The establishment of supportive policies such us offering of subsidies or free medical schemes to highly productive units per given farming year; or scholarship packages for children and adults of the unit according to the minimum production percentage given for eligibility for the same (this is meant to curb problems of rural children finances of education as well as reduction of poverty).
More food must be produced to contain the impact of soaring prices on poor consumers, and simultaneously boost productivity and expand production to create more income and employment opportunities for the rural poor. Smallholder farmers must have proper access to land and water resources and essential inputs such as seeds and fertilizers.
To ensure that small farmers and rural households benefit from higher food prices, a policy environment that relaxes the constraints facing the private sector, farmers and traders, must be created. That would mean reversing the decline in the level of public resources spent on agriculture and rural development and investing more in agriculture.
|PhotoCredit: Niti Bhan Kenya 2012|
Even as experts and specialists split hairs in their current debate over Africa’s rise, one has begun to see some weak signals of the economic potential of private agribusinesses on the continent’s economy. Granted that the emphasis on agriculture itself by a variety of organizations is not insignificant, particularly in the context of the continent’s food security. However, what we’re sensing now is the entrepreneurial opportunity being embraced by youth and yuppies – non traditional segments – who bring more education, training and exposure to a wide variety of value additions.
Miss Gratitude Ntonda Mandiangu of the DRC is but one example. A young professionally trained food technician in her twenties, she saw wealth in the wasted fruit from neighbourhood orchards, unable to reach any markets in time due to lack of infrastructure and transport.
“Passion fruit juice here, mango juice there, the ginger and orange juices at the back. And here the honey and mead used as sweeteners,” says Gratitude. The sound of clinking glass bottles fills the 25sqm workshop where the young Congolese woman turns surplus fruit into delicious drinks. “We had to find a way to add value to this readily available raw material,”
And she isn’t the only one – there are the “rice brothers” in Mali and a Nigerian aspiring to emulate the success of the Amul farmer’s cooperative, now one of India’s most valuable brands. These are only a handful of known examples, where there must be many many more. The big difference here is the startup opportunity by private entrepreneurs building brands is as much of an upwardly mobile movement as large scale agribusinesses or horticultural plantations geared for lucrative export markets.
|PhotoCredit: Niti Bhan Kenya 2012
Private equity has picked up the scent and begun entering this space. Here’s a snippet from the news:
At the end of last year private equity firm Silk Invest noted that the food industry is the most obvious way to tap into increasing spending power in Africa. The firm manages the Silk African Food Fund, which is a private equity fund that invests in processed food, beverages and quick-service restaurant companies on the continent.The fund has so far invested in a confectionery company in Egypt, a quick service restaurant brand in Nigeria, and a biscuit manufacturer in Ethiopia.
Last week The Abraaj Group, a private equity firm with operations across the world, announced that it will acquire a 100% stake in Fan Milk International, one of West Africa’s largest dairy companies. Established in Ghana more than 50 years ago, Fan Milk is today one of West Africa’s top producers and distributors of frozen dairy products and juices.
In addition to Ghana, the company also operates subsidiaries in Nigeria, Ivory Coast, Burkina Faso, Togo and Benin. It is estimated that Fan Milk currently sells more than 1.8 million products on a daily basis throughout West Africa.
Towards the end of 2012, South African consumer goods giant Tiger Brands bought a majority stake in Dangote Flour Mills (DFM), one of Nigeria’s largest flour and pasta producers.
With all the natural resources required for agriculture and other farm related produce, there’s as much of a chance that “Grown in Africa” just might become the “Made in China” by the end of this decade.
The tangible manifestation of the concept of turning government’s calls to action for public private partnerships in development was crafted by Jeroen Meijer of JAM Visualdenken and expertise on sustainable agricultural value chains provided by Bart Doorneweert of LEI, Wageningen.
The design challenges, as we called them, reframed the problem statement in the form a visualization of the particular commodity, the particularities of its geography, the intent of the intervention, the point of view to be taken by the multi stakeholder teams and the good agricultural practices to be sustainably transferred to enable adoption even after donor funding was ended.
Here is the sample:
My colleague and project leader for the current work in The Netherlands, Bart Doorneweert has just published an excellent analysis of our workshop on user centered design for a multi stakeholder group invited by the Ministries of Economic Affairs and Foreign Affairs.
Here’s a snippet:
Insights on the multi-stakeholder working process
When the break-out groups re-convened after their design exercises, we asked each group to present their ideas, and discuss their assumptions and constraints with the audience. Across all presentations we discovered an interesting pattern. Participants found themselves to be confronted with an inability to associate with the user, deeming that area of the value chain apprehensive for conjecture about farmers’ needs, and too far removed in terms of values. In our attempt to lower the barriers to applying the user-centered approach through a free-form exercise, we apparently raised an inherently imbedded barrier to consider the user. Rather, participants insisted to direct their problem-solving attention to a more abstract, distant level of thinking (the value chain), or a particular part of the value chain that is more closely associated with Western values (working from the perspective of Nespresso, rather than the coffee farmer).
This inability to associate with the users had impactful implications for ways in which the groups constructed design solutions. The approaches used were vertical in nature, thinking only within the bounds of what would directly associate with production of a particular agricultural commodity. In their thinking on solutions, people diverted to general principles (tea production provides for income, and thus makes the farmers happy), and then divided the relevant principles into disciplinary segments (like finance, training, agronomy, trade, etc).
|The System Monster, by Jeroen Meijer, Jam visualdenken|